Withholding Tax and Estimated Tax

Your retirement plan distributions are subject to federal income tax withholding. However, you can choose not to have tax withheld on payments you receive unless they are eligible rollover distributions. (These are distributions, described later under Rollovers, that are eligible for rollover treatment but aren’t paid directly to another qualified retirement plan or to a traditional IRA.) If you choose not to have tax withheld or if you don’t have enough tax withheld, you may have to make estimated tax payments. See Esti- mated tax , later.

The withholding rules apply to the taxable part of payments you receive from:

• An employer pension, annuity, profit-sharing, or stock bonus plan;

• Any other deferred compensation plan;

• A traditional IRA; or

• A commercial annuity.

For this purpose, a “commercial annuity” means an annuity, endowment, or life insurance contract issued by an insurance company.

Choosing no withholding. You can choose not to have income tax withheld from retirement plan payments unless they are eligible rollover distributions. You can make this choice on Form W-4P for periodic payments or Form W-4R for nonperiodic payments. This choice generally remains in effect until you revoke it.

The payer will ignore your choice not to have tax withheld if:

• You don’t give the payer your SSN (in the required manner); or

• The IRS notifies the payer, before the payment is made, that you gave an incorrect SSN.

TIP

There will be no withholding on any part of a distri- bution where it is reasonable to believe that it won’t be includible in gross income.

Publication 575 (2025) 9

To choose not to have tax withheld, a U.S. citizen or resident alien must give the payer a home address in the United States or its territories. Without that address, the payer must withhold tax. For example, the payer has to withhold tax if the recipient has provided a U.S. address for a nominee, trustee, or agent to whom the benefits are delivered but hasn’t provided their own U.S. home address.

If you don’t give the payer a home address in the United States or its territories, you can choose not to have tax withheld only if you certify to the payer that you aren’t a U.S. citizen, a U.S. resident alien, or someone who is subject to section 877 because you expatriated before June 17, 2008. See Form 8854 and its instructions for details about section 877. But, if you so certify, you may be subject to the 30% flat rate withholding that applies to nonresident aliens. This 30% rate won’t apply if you are exempt or subject to a reduced rate by treaty. For details, see Pub. 519.

Periodic payments. Unless you choose no withholding, your annuity or similar periodic payments (other than eligible rollover distributions) will be treated as wages for withholding purposes. Periodic payments are amounts paid at regular intervals (such as weekly, monthly, or yearly) for a period of time greater than 1 year (such as for 15 years or for life). You should give the payer a completed withholding certificate (Form W-4P or a similar form provided by the payer). If you don’t, tax will be withheld as if you were single with no adjustments made in Steps 2 through 4 on Form W-4P.

Tax will be withheld as if you were single with no adjustments made in Steps 2 through 4 on Form W-4P if:

• You don’t give the payer your SSN (in the required manner), or

• The IRS notifies the payer (before any payment is made) that you gave an incorrect SSN.

You must file a new withholding certificate to change the amount of withholding. See the instructions for Form W-4P and Periodic Payments in Pub. 505 for more information.

Nonperiodic distributions. Unless you choose no withholding, the withholding rate for a nonperiodic distribution (a payment other than a periodic payment) that isn’t an eligible rollover distribution is 10% of the distribution. You can also ask the payer to withhold an additional amount using Form W-4R. The part of any loan treated as a distribution (except an offset amount to repay the loan), ex- plained later, is subject to withholding under this rule.

Eligible rollover distribution. If you receive an eligible rollover distribution, 20% of it will generally be withheld for income tax. You can’t choose not to have tax withheld from an eligible rollover distribution. However, tax won’t be withheld if you have the plan administrator pay the eligible rollover distribution directly to another qualified plan or an IRA in a direct rollover. For more information about eligible rollover distributions, see Rollovers , later.

Estimated tax. Your estimated tax is the total of your expected income tax, self-employment tax, and certain other taxes for the year, minus your expected credits and withheld tax. Generally, you must make estimated tax payments for 2026 if you expect to owe at least $1,000 in tax (after subtracting your withholding and credits) and you expect your withholding and credits to be less than the smaller of:

1. 90% of the tax to be shown on your 2026 return, or

2. 100% of the tax shown on your 2025 return.

If your adjusted gross income for 2025 was more than $150,000 ($75,000 if your filing status for 2026 is married filing separately), substitute 110% for 100% in (2) above. For more information, see Pub. 505.

In figuring your withholding or estimated tax, re-

TIP member that a part of your monthly social security

or equivalent tier 1 railroad retirement benefits may be taxable. See Pub. 915. You can choose to have in- come tax withheld from those benefits. Use Form W-4V to make this choice.